Internal Environment

Analysis
Prepared by: Limheya Lester Glenn R
PCU-MBA Program.
 Leanrning Objectives:
1. Describe how to perform an internal strategic-management audit.

2. Discuss the Resource-Based View (RBV) in strategic management.

3. Discuss key interrelationships among the functional areas of business.

4. Identify the basic functions or activities that make up management, marketing, finance/accounting, production/ operations, research and
development, and management informationsystems.

5. Explain how to determine and prioritize a firm’s internal strengths and weaknesses.

6. Explain the importance of financial ratio analysis.

7. Discuss the nature and role of management information systems in strategic management.

8. Develop an Internal Factor Evaluation (IFE) Matrix.

9. Explain benchmarking as a strategic management tool.

Internal Environmental
Analysis
 “
Knowing yourself is
the beginning of all
Wisdom
-Aristotle
Definition
An internal analysis examines your organization’s internal
environment in order to assess its resources, competencies,
and competitive advantages. Performing an internal
analysis allows you to identify the strengths and
weaknesses of your organization. This knowledge then aids
the strategic decision making of management while they
carry out the strategy formulation and execution process.
Nature of an Internal Audit
In strategic management, an internal
audit determines the organization's
position within its industry. This
process is essential for building and
maintaining a sustainable competitive
advantage, and typically consists of
at least one, or a combination of,
distinct analytical tools.
KEY
INTERNAL
FACTORS
Key Internal Forces
Functions:
1.) customer analysis
2.) selling products/services
3.) product and serviceplanning,
4.) pricing
5.) distribution
6.) marketing research
7.) opportunity analysis.
Key Internal Forces
Functions of Both Finance & Accounting
1.) Investment decision/Capital Budgetting

2.) Financing decision/Capital Structure

3.) Dividend decision

Trend Analysis
Example:
Financial Ratios
1.) Liquidity ratios
2.) Leverage ratios
3.)Activity Ratios
4.) Profitability Ratios
5.) Growth Ratios
Liquidity Ratio
Leverage Ratio
Activity Ratio
Profitability Ratio
Growth Ratio:
Break Even Analysis
Functions:
1. Process
2. Capacity
3. Inventory
4. Workforce
5. Quality
Functions:
1.) Planning
2.) Organizing
3.) Motivating
4.) Staffing
5.) Controlling
 Allocating Funds for Research
(1) financing as many project proposals as possible

(2) using a percentage-of-sales method

(3) budgeting about the same amount that competitors spend for
R&D

(4) deciding how many successful new products are needed and
working backward to estimate the required R&D investment
Forms of Doing R&D
(1) internal R&D, in which an organization operates its own
R&D department

(2) contract R&D, in which a firm hires independent

researchers or independent agencies to develop specific
products
Management Information
System
 Definition:
Information ties all business functions together and provides the
basis for all managerial
decisions. It is the cornerstone of all organizations. Information
represents a major source
of competitive management advantage or disadvantage. Assessing a
firm’s internal
strengths and weaknesses in information systems is a critical
dimension of performing an
internal audit.
Top 10 Strategic-Planning Software
KPISOFT.
Workboard.
Cascade Strategy.
ClearPoint Strategy.
Rhythm.
AchieveIt.
MPOWR Envision.
Sciforma.
Hansoft
Allstacks
The Process of Performing an Internal Audit
The process of performing an internal audit closely parallels the process
of performing an
external audit. Representative managers and employees from
throughout the firm need to
be involved in determining a firm’s strengths and weaknesses. The
internal audit requires
gathering and assimilating information about the firm’s Key Internal
Factors
Thanks!
 References:
https://www.cascade.com
https://www.indeed.com/career-advice/career-
development/internal-analysis
David, Fred R. (2011). Strategic Management: Concepts and
Cases. 13th ed